China’s Huayi Brothers Media Corp. agreed to a three-year film-financing deal with STX Entertainment, a startup studio founded by Hollywood producer Robert Simonds and TPG Capital Management.
The accord lets the Los Angeles-based studio increase the number of movies it makes to 12 to 15 a year from 8 to 10 by 2016, as well as bolster its distribution in China, the companies said in a statement Wednesday. The deal also enables STX to spend $1 billion a year producing, marketing and distributing its films worldwide.
The venture is the latest example of Hollywood deal making by Chinese investors, as the nation’s movie market continues to expand and is projected to become the world’s biggest by 2020. The partners said it was the first time a Chinese company would be involved in all production, marketing and distribution of U.S films.
“This deal will help Huayi Brothers access the Hollywood film industry, with participation in all segments including film financing, production and distribution,” Dennis Wang, chief executive officer and a founder of Huayi Brothers, said in the statement. Terms weren’t disclosed.
Hony Capital, the Chinese private-equity firm, is another investor in the studio.
Donald Tang, managing partner of Tang Media Partners and a former vice chairman of Bear Stearns Cos., facilitated the deal, according to Simonds.
“There’s a reason so many deals in Hollywood make sense and are announced and never actually consummated and for me the secret is they don’t have that person who really brings it together,” Simonds said of Tang in an interview.
Simonds, whose producing credits include the Adam Sandler comedies “Big Daddy” and “The Waterboy,” said the studio would spend about $75 million on each film, including $35 million in marketing costs. STX Entertainment has debt financing underwritten by JPMorgan Chase & Co. and Bank of America Corp.
Huayi will co-fund, co-produce and co-distribute almost all STX Entertainment films through 2017, and share in global revenue, according to the statement. Huayi has first-look distribution deal in China on most STX Entertainment films.
The projects include “The Free State of Jones,” which features Oscar winner Matthew McConaughey and is scheduled for release next year, and the thriller “The Gift,” produced by Jason Blum and starring Jason Bateman, which hits theaters in July.
The studio was set up last year, in partnership with producer Gigi Pritzker, and has hired senior executives including Oren Aviv, formerly at 21st Century Fox Inc.’s film unit, as president and chief content officer for motion pictures, and Adam Fogelson, a former chairman of Universal Pictures’ film business, as chairman of the motion-picture unit.
The deal with Huayi Brothers is the latest Chinese partnership in Hollywood.
The largest remains Dalian Wanda Group’s 2012 acquisition of exhibitor AMC Entertainment Holdings Inc. for $2.6 billion including debt. Last year, Fosun International Ltd., controlled by Chinese billionaire Guo Guangchang, invested in Studio 8, founded by former Warner Bros. Pictures president Jeff Robinov. Those films will be distributed by Sony Corp.
“This deal represents a growing partnership between Hollywood and China,” Lindsay Conner, a partner at law firm Manatt, Phelps & Phillips and adviser to Huayi Brothers on the deal, said in an interview. “After a number of years when more was said than done, we are starting to see deals closing.”
By distributing its own films, STX Entertainment distinguishes itself from other production companies. It has direct distribution agreements with the largest North American theater chains, including Regal Entertainment Group, AMC Entertainment, Cinemark Holdings Inc. and Carmike Cinemas Inc.
“This is literally just the tip of the iceberg of many other deals that we are going to be doing in other streaming and digital spaces with other major players in China,” Simonds said.